In a move that has significantly impacted global markets, former US President Donald Trump confirmed the imposition of 25% tariffs on imports from Canada and Mexico, effective March 4. Additionally, Trump announced a further 10% levy on Chinese imports. The EUR/USD currency pair is trading below 1.0400 in European trading on Friday, reflecting market volatility following these tariff announcements. Meanwhile, the gold market is experiencing a downturn, with prices attracting sellers for the second consecutive day.
The current risk-off mood and declining US bond yields are not bolstering the appeal of gold, with a stronger USD making the precious metal less attractive to investors. Traders are eagerly anticipating the US PCE Price Index release, seeking substantial impetus from the data. Additionally, both German and US inflation data are awaited by market participants to gauge the economic outlook.
Despite upbeat German Retail Sales and Import Prices data, the Euro failed to impress, facing challenges from Trump's tariff policies. The GBP/USD pair has also extended its drop below 1.2600 in the European session on Friday. The uncertainty surrounding US tariffs is weighing heavily on the Pound against the US Dollar, while commentary from the Bank of England has not significantly impacted the currency.
Interestingly, despite the tariff announcements, the EUR/USD has maintained stability thus far. Markets are optimistic that Trump's threats may not materialize into action, hoping that his bark will be worse than his bite. This sentiment is fueling some resilience in the Euro against the Dollar.
Moving forward, all eyes are on the forthcoming US PCE inflation data, which is expected to have a significant impact on market movements. The data will provide critical insights into inflationary pressures and could influence future monetary policy decisions.